In response to major progress on their balance sheets, the Federal Reserve has given the nation’s big banks a green light to take capital risks that appear to dull the teeth of the Dodd-Frank Act. In sports parlance, regulators have stopped playing hardball with the banks and shifted to softball.

On June 28, the Federal Reserve allowed these banks to reduce the capital buffers imposed under Dodd-Frank. Bank executives successfully argued that they have enough capital to withstand another financial crisis like 2008’s. They have increased their overall capital to $1.2 trillion from approximately $500 billion in 2009.

The Fed approved 34 banks’ plans to increase dividends and implement buybacks to their highest levels in years. On average the banks requested raising payouts to nearly 100 percent of their expected earnings. I would be more comfortable limiting payout to 75 percent so their capital would continue to grow steadily.

In addition to relaxing the capital buffers, the Fed required only 13 of the largest (also known as too-big-to-fail) banks to pass an exam of their risk-management practices.

The Fed’s action should further help the stock price of financial firms because yield investors relish the prospect of higher dividends. This sector rallied sharply after President Trump’s election, but this year has been a different story. The KBW Nasdaq Bank index is up only 3.8 percent year to date versus an 8.9 percent gain for the S&P 500. Financials have underperformed the market because of lackluster economic indicators and a flattening yield curve. A flat yield curve means that there is little difference between short-term and long-term rates for bonds of the same quality. Banks tend to make more money when overall interest rates are higher and long-term rates are significantly higher than short-term rates.

These are just a few of the banks’ immediate responses to passing the Fed’s Stress Test:

• Citigroup plans to return $18.9 billion to shareholders over the next 12 months.

• Morgan Stanley wants to pay out more than 100 percent of its earnings over the near term.

• J.P. Morgan raised its dividend 12 percent and announced a 19.8 billion buyback program.

Should we worry that banks have already returned to the risk policies of the pre-crisis days?

I agree with Mark Williams, a banking expert at Boston University, who raised concerns that less regulation and a laissez-faire-oriented White House could set the stage for a return of enormous leverage and freewheeling deals until the music inevitably stops.

The Federal Reserve’s annual stress test of banks showed that credit cards had become their No. 1 concern. They projected under a severely adverse hypothetical recession that banks would incur $100 billion of credit card losses. I am also concerned that a number of banks, such as Wells Fargo, initiated a mortgage program that requires only a 3 percent down payment for first-time homebuyers.

My 35 years on Wall Street gave me an orchestra seat on the motivations of Wall Street executives. In brief, we understood that a bird (bonus) in the hand is worth much more than two in the bush.

Main Street remains very bitter about the gentle treatment of Wall Street institutions and their executives, given the global meltdown caused by the Great Recession.

When I came to Wall Street in 1969, a new, more risk-oriented Wall Street executive replaced very conservative bankers who had worked during the Great Depression. Until the mid-1970s, investment banks could not have public shareholders and be members of the New York Stock Exchange. Once they could raise money in the public markets, the downside of irresponsible behavior shifted to shareholders from managing directors.

We need to make Wall Street executives understand that we will impose draconian financial penalties on them personally for transgressions. A Tiger does not change its stripes!

Originally published in the Sarasota Herald-Tribune